THIS country has been under a banking credit crunch for some time, but if you’ve had no reason to apply for a loan or a mortgage recently, you may not have noticed.

But if you have applied for any kind of loan in the past 12 months, the reality has probably hit home already because of the high likelihood that your application has been rejected, especially if it was a mortgage you were looking for.

A recent survey shows that 80pc of recent mortgage applications have been rejected because the banks have tightened their lending criteria, and have fears over many applicants’ job security.

The banks’ reluctance to lend may be understandable enough given the rate of job losses at the moment, but what are the other reasons why a lender would refuse you a loan?

If you are refused credit, you can ask your lender to explain why, but they do not have to tell you, according to the Financial Regulator. If they don’t and you want to find out, it may be worthwhile investigating your credit rating.

When you apply for a loan, lenders may check your credit history in order to find out how likely you are to repay the loan.

They do this by going to a credit reference agency, which in the vast majority of cases means the Irish Credit Bureau (ICB). It is the biggest such agency and is owned by over 100 institutions, including banks, finance companies, credit unions, and local authorities.

These institutions send information about borrowers and their loan repayments to the ICB, which keeps a credit history file on each borrower.

If you have ever borrowed the chances are the ICB has a file that may contain information about any loans you have now or took out in the past, how many repayments have been made or missed, and information about any loan settlements or legal action that your lender has taken against you.

These loans can include mortgages, personal loans and car loans, as well as leasing and hire-purchase agreements. It may also include details on your credit cards, but not overdrafts.

If you have any applications for loans in the past, even if they have not been approved, these will also show up.

Your ICB file should also contain a “credit bureau score”, which is basically a lender’s way of quickly establishing how good a lending risk you are.

So if you repaid every loan on time, you will likely have a high score, which means your loan application is more likely to be accepted. But if you have missed a payment on a loan or fallen behind with your mortgage, you are likely to have a low score, which means you may find it more difficult.

As well as getting into arrears with loans, court judgments and any bankruptcy proceedings will also badly dent your credit score, according to Liam Kelly, debt recovery manager at Deirdre K Ryan Solicitors.

“This is especially true for loans from financial institutions as they will register this information with the ICB and will be picked up by other lending institutions,” he says.

However, even if you have taken out loans and have not missed or fallen behind on any payments, it’s not always guaranteed that it will show up on your credit history.

The Irish credit ratings system is much less sophisticated than in other countries, such as the UK, and therefore less used, according to Tom Conlon, director of Bankhawk Ireland, a bank industry consultancy.

“If you are the type of person who does all your banking with one bank, including loans, credit cards or mortgages, then your bank may not need to refer to any rating agency anytime you apply for a new loan,” he says.

“Essentially, you have a credit rating within your bank. As long as you meet your repayments, no information is normally handed out externally by your bank.”

It is usually only in a situation where you find yourself in serious debt that your bank will quickly supply a report to the rating agency.

But if you are a customer of more than one bank, then there may be more information on your ICB file.

“If you spread your business about then each of your lenders has little information about you. This is where they rely most heavily on credit ratings,” says Mr Conlon.

If you have been turned down for a loan, or you are just curious, you can apply to the ICB to get a copy of your credit history. It costs just €6 and you can apply online at www.icb.ie or by telephone on (01) 2600388.

From Irish Independent 16/6/09